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88.2% of developers expect home prices to rise in next six months: NUS-REDAS

Some 88.2% of developers anticipate residential property prices to increase in the next six months amid a hike in new home launches, according to the 1Q2018 report by NUS-REDAS Research.

Only 5.9% of them expect the residential prices to remain unchanged, while another 5.9% expect a fall in prices.

The research, published every quarter, measures the market perceptions and expectations of members in the Real Estate Developers’ Association of Singapore (REDAS). Survey respondents include developers, consultants, contractors, architects, as well as real estate marketing and investment firms. Developers and consultants form the majority.

Of the developers surveyed, 82.4% said they would increase the number of new launches while only 2.9% said they would lower that number. Some 14.7% said they would maintain their number of launches.

“Developers are still waiting for the right time to launch and may only launch small batch to test market receptiveness to new and increasing pricing level,” one respondent noted.

In recent years, the Singapore government has rolled out cooling measures to control real estate prices, enacting higher buyer and seller stamp duty and increasing loan requirements. One respondent believes that such measures will control the rate of rising home prices. “Developers’ margin might be squeezed,” the respondent said.

On Development Charge (DC) for non-landed residential properties, 62% of the developers believe that the latest increase — by 22.8% on average – is “unusually high”, the report stated. Despite that, 65.1% of the total respondents believe that there will not be a significant cutback in collective sales over the next six to nine months.

Some respondents believe that the recent spate of en bloc sales has boosted the demand for homes. “En bloc beneficiaries will start to receive proceeds gradually and will likely re-enter the market and pick up replacement homes or reinvest in properties for capital appreciation or rental investment,” a REDAS member wrote.

In terms of potential risks to the real estate market, 87.3% of respondents are worried that rising interest rates and inflation will hamper demand in the next 6 months; this is followed by an excessive supply of new property launches, at 50.8%, and cooling measures by the government, at 49.2%.

Interest rate hikes could put pressure on smaller firms seeking loans. Likewise, inflationary pressures could come about as current demand for properties exceeds supply. “This inflationary pressure is [then] likely to work itself into the secondary market as the collective sale owners, enriched by their new-found wealth, head into the market seeking a replacement home,” one respondent noted.

Of all the real estate segments, Prime Retail reflects the only negative market sentiment. Suburban Residential reflects the strongest market sentiment, followed by Prime Residential and Office.

Demand for retail space, however, is expected to improve. It “should start to play some catch-up in view of the improving consumer sentiment, tight labour market and recovering tourism”, another REDAS member said.

The research is jointly conducted by REDAS and the National University of Singapore’s real estate department.